The Wal-Mart Slayer: How Publix's People-First Culture Is Winning The Grocer War

CEO Ed Crenshaw: "Publix just might be the best company in the whole world." Credit: Bob Croslin for Forbes

Family-run Publix is both the largest employee-owned company and the most profitable grocer in America. Those two facts are linked, and they might be the formula for fending off Bentonville’s retail behemoth.

Passing through Publix’s sliding doors to escape the blistering Lakeland, Fla. heat is a welcome relief, but it isn’t just the air-conditioning that jumps out at you. As you walk the aisles, bag boys and clerks in sage-green shirts and black aprons routinely smile and ask questions: “How are you today? Can we help you with anything?”

When a middle-aged woman asks about a box of crackers, no aisle number is blurted out. Instead, an employee races off to find the item, just as he is trained to do. At checkout, shoppers move to the front quickly, thanks to a two-customer-per-line goal enforced by proprietary, predictive staffing software. Baggers, a foggy memory at most large supermarket chains, carry purchases to the parking lot. Even Publix’s president, Todd Jones, who started out as a bagger 33 years ago, stoops down to pick up specks of trash on the store floor.

“We believe that there are three ways to differentiate: service, quality and price,” Jones says. “You’ve got to be good at two of them, and the best at one. We make service our number one, then quality and then price.”

If that’s a dig at Wal-Mart–traditional slogan: “Always low prices”–which has recently targeted Publix’s home turf, Florida, it’s a subtle one. The more direct retort comes via the numbers. As best we can tell, Publix is the most profitable grocery chain in the nation: Its net margins, 5.6% in 2012, trounced Wal-Mart’s (3.8%), as well as those of every public competitor, ranging from mass market Kroger (1.6%) to hoity-toity Whole Foods (3.9%).

Those numbers in a field notorious for razor-thin margins stem from another heady fact: Publix, the seventh-largest private company in the U.S. ($27.5 billion in sales) and one of the least understood thanks to decades of media reticence, is also the largest employee-owned company in America. For 83 years Publix has thrived by delivering top-rated service to its shoppers by turning thousands of its cashiers, baggers, butchers and bakers into the company’s largest collective shareholders. All staffers who have put in 1,000 work hours and a year of employment receive an additional 8.5% of their total pay in the form of Publix stock. (Though private, the board sets the stock price every quarter based on an independent valuation; it’s pegged at $26.90 now, up nearly 20% already this year.) How rich can employees get? According to Publix, a store manager who has worked at the company for 20 years and earns between $100,000 and $130,000 likely has $300,000 in stock and has received another $30,000 in dividends.

The route to that payday is completely transparent. Publix almost exclusively promotes from within, and every store displays advancement charts showing the path each employee can take to become a manager. Fifty-eight thousand of the company’s 159,000 employees have officially registered their interest in advancement. Associates are encouraged to rotate through various divisions, from grocery to real estate to distribution, to get a broad sense of the business. A former cake decorator in a store bakery is now in charge of all strategy for its bakeries. A distribution-center manager overseeing 800 associates got his start unloading railcars. When Lakeland store manager Edd Dean started bagging groceries as a teenager, he never expected to still be working in a supermarket 30 years later. “When I graduated college I had been seven years at Publix, and I started looking for a ‘real job,’?” he says. “I interviewed at a lot of companies, but the manager I was working with kept hounding me to come to Publix. Eventually it just clicked.” Dean is one of 34,000 employees who have more than ten years of tenure.

“I’m always amazed that more companies don’t recognize the power of associate ownership,” says Publix CEO Ed Crenshaw, 62, the grandson of founder George Jenkins and the fourth family member to run the company. While Crenshaw has a 1.1% stake in Publix, worth $230 million, and his entire family has 20%, worth $4.2 billion (see box, p. 102) , the employees (and former employees) are the controlling shareholders, with an 80% stake, worth $16.6 billion. Not surprisingly none of them belongs to a union.

Publix has effectively developed a hammerlock in the lucrative Florida market, where its 755 stores (out of 1,073 total) more than double any rival’s. “They have blanketed the state so thoroughly that it has made it difficult for anyone else to make inroads,” says Mark Hamstra, editor of Supermarket News.

That’s now changing. The formidable Wal-Mart is targeting Florida after saturating every other market in the South; it now has 239 locations with grocery departments in the state. Kroger, the nation’s second-largest retailer, with $97 billion in sales, bought upscale grocer Harris Teeter in July, picking up its first store in Florida since pulling out in 1988. It also competes directly with Publix in the Atlanta area–and soon will be with its slew of locations in North Carolina, which Publix plans to enter next year. German discount retailer Aldi has also moved into Florida.

Yet Crenshaw remains unfazed–he has faith in his employees and his complex compensation system that, in addition to ubiquitous ownership, grants shares of a store-specific bonus pool every 13 weeks. The exact amount varies, but typically 20% of quarterly profits go into that larger pool; 20% of the pool is then paid out in cash to the store’s employees. “When competition opens up across the street and our sales are impacted, they’re impacted,” he says. “So they’re incented to make sure they’re doing everything they can to serve that customer to the best of their ability.”

THE TRADITION OF employee ownership dates back to Crenshaw’s grandfather, whose office at Publix’s old headquarters is being restored to its wood-paneled 1960s glory for historical tours. (“It’s our Graceland,” says one assistant store manager.) As the story goes, George Jenkins had been the manager of a successful Piggly Wiggly market in Winter Haven, Fla. but quit at the start of the Great Depression when the new corporate owner, based in Atlanta, refused to grant even five minutes of face time despite Jenkins’ driving eight hours to see him. While forced to wait outside the office, Jenkins supposedly overheard his new boss talking about golf, so he resolved to quit and start a rival store in Winter Haven. From the outset he gave shares in the company to early employees in an effort to win their loyalty.

Jenkins’ big gamble came a decade later. He closed his two stores, borrowed against an orange grove he owned and opened a state-of-the-art supermarket with then new amenities like air-conditioning, wide aisles, automatic doors, fluorescent lighting and a water fountain. People mocked him for pouring money into unnecessary details. But customers loved the in-store comforts, especially the relief from the sweltering Florida sun, and thanked him by spending more on average than they had previously.

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Publix, it is a family oriented store.. unlike Wal Mart and many others. The stores are beautiful, even the older stores in Florida. . I can not grocery shop at Wal Mart. They do not carry 1/4 of what I buy, I also found that Publix runs their ad’s on a regular basis where I can buy what I need.. by spacing my items. Publix do not up their prices to do a BOGO, and almost always the shelves are stocked, if not I can ask a near by clerk or cashier.. and someone will go and get the item for me. If not in stock, they will take my name /phone number, and call me. And yes they do call .. set the item aside w/ my name on it!

I have actually asked for an item they do not carry at Publix, someone goes and gets it where ever they can find it, buys it and calls me.. I go to my local Publix and pick it up ! Now, Wal Mart.. that is customer service!

The bathrooms are very clean.. and Publix bakery is the best ! I recently learned that Mr Jenkins , actually bought out a lady baker .. and many of the items that started Publix bakery was made by her original recipe’s. Some of Publix bakery items.. are second to none.

Meat dept / seafood depts.. Oh my! Always clean / sparkling. Extremely helpful meat cutters and seafood specialist. I get suggestions on how to fix items, what to look for .. they are always telling me how to make my choices .. and never once, do they say no .. I always get what I ask for even if they have to cut it for me, while I wait. Can’t get that at Wal Mart ! What I like the so much, is the clean cut.. whole some look of the staff. They smile.. are helpful. If I can’t find something, they stop what they are doing, say its on isle #, and then take me there.. help me pick out what I want..ask me if there is anything else they can help me with. Not one time, have I heard any one at Publix say, I don’t know.. ask at the service desk. If they don’t know, they find out..

Another thing, I notice at Publix, they have spanish speaking stores too ! And I noticed they also have handicapped employee’s and elderly.

I can find what ever I need at Publix, so .. why bother any where else ? I do not save money at Wal Mart, if I have to leave there and go to Publix to get what wal mart doesn’t have.. and do not bother to help me find!

I also am a former S. Florida resident and I can conquer that you do get a pleasant attentive shopping experience from the Publix grocery chain. I can’t wait for them to open up stores here in North Carolina. They really do care for their shoppers and it shows ;-D

Your widget example highlights the difference between Publix and its competitors – that Widget the child leaves behind? The highly trained and dedicated staff at Publix will get that item back to the shelf within hours (sometimes minutes). That product the contractor wanted? The highly trained and dedicated staff at Publix will satisfy that customer’s desires by going as far as to drive to another Publix or one of their warehouses to pick that product up for that customer. And that empty shelf? It would get filled in less than a week.

How is all this possible? Because Publix associates are highly trained and dedicated because any missed opportunity directly affects them.

Have you seen that kind of dedication at a Wal Mart on a consistent basis? Nope.

I want to know are their prices competitive with Wal Skanks? The one redeeming thing that Wal Skanks has, is that while people are making less and less money Wal Skanks has the lowest prices. Even though they are raising them at an alarming rate.

I have worked in retail and we had a simple system and managed to keep up with things and NEVER rune out like walmart. That included doing all inventory by hand so do not give me your crybaby routine. It may be ok to be out of an occasional ‘widget’ but not constantly out of such things like staple grocery items. You just do not know how to order. Most of the items that people are complaining about are everyday items you cannot tell me that coffee, pretzels, chips or sodas sit for an entire year. Many places have a simple rule of; order 10% more than last weeks sales. In the case of extremely high volume you might try 15% until you get it right. For Walmarts, they should start with at least 20% maybe 30% more because they must account for lost/potential sales because they are always out of things.

David, one of the things I love about Publix is their willingness to please their customers. A few years ago I was on a very strict diet you may have heard of, Adkins. I was looking for an alternative to the artificial sweeteners. I learned of Stevia which no one carried, but I asked an employee at Publix who went straight to her manager. The manager scratched his head for a moment and told me he would find out about getting it for me. So I left my number and a day later he called me back to let me know it was on its way. I have since gotten many other items ordered from other Publix locations. The latest was for my 12 year old son, Faygo Orange soda. My son found it on the internet and had to have it. The Publix on west hwy 192 in Clermont, Fl. Was more than happy to order in three cases for him. In my humble opinion Publix is and always will be the greatest place to shop for my family.

I live far from any Publix, although it would be nice to see one around here… it sounds like they are doing a lot of things right!

Anyway, the “customers!” comment was meant to be facetious, a tongue-in-cheek response to the oft-repeated complaint of unstocked shelves in any retail environment. While every store is different in the way it handles stocking, the customers never care about the details – they just don’t like the fact that they can’t get their Cheez Whiz.

And actually, @Evan Lewis, I don’t particularly like WalMart or the way it handles stocking but I was talking to Robert, not you, when I said “you clearly never worked retail”. Obviously you have a grasp of the issues facing buyers and stockers, although I would argue that bookstores face different stocking challenges than grocery stores or home good stores or department stores.

That’s one big difference between a smaller company and one that’s nationwide… “dedication” appears to decline as company size increases. Might be the corporate culture changing?

Our company just discontinued store-to-store transfer trucks. Generally we could get an item in stock for a customer through a transfer (which could take a couple of days), but drive a personal vehicle over to get the item? Even though our managers have done it on occasion the associates are not allowed. Regardless of dedication (and they do encourage workers to go above and beyond the normal job duties), there are safety issues involved in transferring merchandise in personal vehicles.

“All staffers who have put in 1,000 work hours and a year of employment receive an additional 8.5% of their total pay in the form of Publix stock.”

This isn’t entirely accurate. Publix currently owns and operates an 18 hole, par 72 golf course (Lone Palm) that was built by George Jenkins. Unfortunately, while the employees of this golf course are, indeed, Publix associates (they can buy Publix stock, and share the same healthcare), they are not privy to the ESOP program that every other 1,000 hour +/ year + associate enjoys. In fact, constant requests to enroll these estimated 50 employees into the ESOP program, as well as the 401k program, have fallen on deaf ears, citing cost – yes, cost.

There is no question that Publix is a magnificent organization, however, there are employees who contribute to the Publix mission through different channels. Subsequently, these employees, while operating under a different challenge, are are constantly overlooked.

Not sure if this warrant any corrections, but the aforementioned assertion is not an accurate portrayal of the facts.